PROPERTY CHAMBER
FIRST-TIER TRIBUNAL 
LAND REGISTRATION DIVISION

IN the matter of a reference from hm land registry

LAND REGISTRATION ACT 2002

REF No 2015/819

BETWEEN

MICHAEL MIGNOGNA 
Applicant

and

SENDHILL THIAGARAJAN

Respondent

Property Address: 17 Academy Court, Beaconsfield Road, Bexley 
Title number: K898803

Before: Judge McAllister
Alfred Place, London
20 June 2016

Representation: The Applicant appeared in person, assisted by Roshan Silvapalan; the Respondent was represented by Barbara Harris of Hughes-Narborough & Thomas

DECISION

Introduction

1.	The Applicant is the registered owner of a flat at 17 Academy Court, Beaconsfield Road, Bexley (‘the Property’). On 15 October 2013 the Respondent registered a notice and restriction in respect of a contract for sale (‘the Contract’) dated 2 October 2013. The Applicant applied on 25 August 2015 to cancel the notice and the restriction on the grounds that the contract had been brought to an end as a result of a number of breaches, and (as he later claimed) by agreement.

2.	For the reasons set out below I will order the Chief Land Registrar to give effect to the applications. The Contract has been brought to an end, both by the breaches, and by the acceptance by the Respondent that it is no longer effective.

      The Contract and Management Agreement

3.	The Property, a two bedroom flat, is held under a lease (‘the Lease’) dated 24 February 2006 for a term of 125 years from 1 July 2005. The ground rent is fixed at £250.00 per annum for the first 25 years, payable on 1 January of each year. In the usual way, the lessee covenanted to pay service charges. The premium paid in 2006 by the Applicant was £205,995.00. As at October 2013 the outstanding mortgage was £185,000. 

4.	On 18 December 2012 the Respondent entered into a Heads of Terms agreement with a broker, Martin Welch Limited, for a 5 year option to take an assignment of the Lease for the sum of £197,000. £5,000 was paid by him to the broker. On 2 October 2013 the parties entered into the Contract. Both had the benefit of legal advice.

5.	The Contract is conditional on the Respondent obtaining a mortgage offer prior to the ‘Cut off date’ (defined as 10 working days before the Completion Date, itself providing for a long stop date of 5 years from the date of the Contract).  The purchase price is £197,000. By clause 5.1 the Respondent agreed to pay a deposit in the sum of £200,000 per month until completion or termination. By clause 5.2 the Contract provided that the deposit is to be credited against the purchase price on completion, and by clause 5.2.2, should the Respondent be in default of his obligations under the Contract or the Management Agreement and, if in consequence, the Contract is terminated, the deposit is forfeited.

6.	Clause 11 provides that the parties intend that the Respondent would manage the Property on behalf of the Applicant in accordance with the terms of the Management Agreement.  Clause 13 is headed ‘Effects of Termination’. It provides that unless the provisions of Clause 5.2.2. apply the Applicant is to return the deposit to the Respondent, and all the relevant documentation. 

7.	The Management Agreement, also entered into on 2 October 2013,  requires the Respondent to pay the mortgage by monthly instalments on behalf of the Applicant. The mortgage is dated 24 February 2006, and the mortgagee is Northern Rock (Asset Management) PLC. In addition, the Respondent agreed to insure the Property and pay all the costs and charges arising under the Lease, and comply with the terms of the Lease. The Agreement also provides for termination by the Owner (the Applicant) by giving one month’s notice in writing at any time, and for termination in the event of a serious breach by the Manager of any of his obligations, or if the Contract is terminated. 

8.	In short, the Respondent agreed to purchase the Property with a long stop completion of 5 years (to 2 October 2018) to allow him to find a suitable mortgage, and, in the meanwhile, he agreed to be responsible for the payment of the Applicant’s mortgage and all the expenses connected with the Property. In addition he agreed to pay £200 per month deposit. It was clearly intended that he could let the Property in the meanwhile. If the market was rising, he had the benefit of knowing that the purchase price was fixed. From the Respondent’s point of view, the benefit (if the market fell) was, again, that the price was fixed, and, in the meanwhile that he was relieved of all responsibilities for the upkeep and payment of the mortgage.

9.	The termination provisions are perhaps not as clear as they could be, but clause 5.2.2 of the Contract can only be read, it seems to me, as allowing for termination by the seller (the Applicant) in the event of any breach of the Contract or the Management Agreement. Clause 2.5 of the Management Agreement also provides for termination of that agreement. 

Events since the contract

10.	I heard evidence from both the Applicant and Respondent, and have read the emails and letters written by or on behalf of both. It is clear from all the evidence that the Respondent was late in making service charge payments and mortgage payments; had missed making certain payments, and had ceased paying the deposit of £200 per month in October 2014 (apart from two payments in April and September 2015. The latter payment was returned to him by the Applicant). As a result the mortgagee began putting pressure on the Applicant to sell the Property. The income which the Respondent was receiving from the tenant (who was already in the Property at the date of the Contract) was not sufficient to meet all the payments due.

11.	I have no doubt that the reason why the Applicant decided in or about May 2014 to re-market the Property was because of the various non payments and late payments by the Respondent, and because the mortgagees were beginning to put pressure on him. I also do not accept the Respondent’s argument that he was not aware of the late/non payment because the letters from the mortgagees and the freeholders were sent to the Applicant and not to him. The Respondent fairly accepted in cross examination that he was having financial problems and that he did miss various payments, and that he was told by the Applicant that the reason for the proposed sale was the pressure being put on him by Northern Rock. He was, of course, in any event liable to pay the monthly deposit payments.

12.	A buyer was found by the Applicant in May 2015, with a purchase price of £212,000. The sale, however, fell through because of a break in the chain. By then, the Respondent had given notice to the tenant.  On 23 July 2015 the Applicant wrote to the Respondent, referring to recent correspondence regarding the mortgage and service charge arrears, and informing him that unless the breaches were rectified within a month (including the payment of the missing deposit due) the Contract and Management Agreement would be terminated.

13.	Following receipt of this letter, it is clear that the parties communicated by telephone. On 29 July the Applicant sent the Respondent an email, in which he set out various calculations. On the assumption that the Property was to be sold for £212,000 he was prepared to give the Respondent a sum of about £5,000 (once the mortgage had been paid off) calculated by reference to the deposit already paid (£2,200), the outstanding sums due by way of mortgage and service charges (£4,158), and the difference between these adjusted figures and £212,000.

14.	The Respondent instructed solicitors, who wrote to the Applicant on 11 August 2015, setting out a different calculation, which would have resulted in the Respondent receiving £13,042.00. The calculation is made by adding the anticipated sale price and deposit paid, and deducting £197,000 plus £4,158. There was no response to this letter. The solicitors sent a chasing email on 19 August 2015.

15.	The Applicant replied by email on 23 August 2015 stating that the sale was proceeding; the delay has been caused by the purchasers solicitors, and that the date for exchange was imminent. This email was sent at 23.10. The following day, without any further communication with the solicitor or the Respondent, the Applicant applied to cancel the notice and the restrictions on his title. 

16.	The Applicant’s response to the notice sent by Land Registry was that the Contract was still extant, albeit varied so as to allow for agreement as to the amount to be paid to the Respondent from the proceeds of sale. It is to be noted that he took no steps to make the missing payments, and did not seek to argue that the Contract had not been terminated.  Although the Applicant was not able to tell me in evidence why he had, it seems, changed his mind about settling the matter with the Respondent between the sending of the email and the decision to apply to cancel the notice and restriction, I have no hesitation in concluding that the parties had not reached any binding agreement as to the division of the proceeds of sale, and that, accordingly, there was no new contract between parties (or, as is put by the Respondent, any variation of the Contract). The sale in any event fell through, and the Property is now tenanted once again.

17.	There was no obligation in the Contract on the Applicant to make any payment to the Respondent, and clause 5.2.2 provided that the deposit would be forfeited in the event of a breach. The discussions between the parties and email sent by the Applicant was no more than an attempt to resolve the matter amicably. 

Conclusion
 
18.	The Contract came to an end following the notice sent on 23 July 2015 as a result of the various non payments referred to above. The argument that the Contract was varied by the Applicant by putting the Property on the market, which in turn meant that the Respondent gave notice to the tenant, and thereby prevented the Respondent from making the payments due, is not sustainable. The Contract was properly terminated.  The Respondent agreed that the Property should be sold.  Any discussions as to how the proceeds of sale might be divided between the parties were no more than just that: no agreement was reached between the parties, and there was no obligation on the Applicant to make any payments to the Respondent.  

19.	19. It follows therefore that entry number 5 in the Proprietorship Register (the restriction) and entry number 4 in the Charges Register (the notice) of the title to the Property must be removed. 

Costs

20.	The Applicant, as the successful party, is in principle entitled to his costs from the date of the reference (19 November 2015). As I understand the position he has only recently been assisted by Mr Silvapalan of Blakes Surveyors. A schedule is to be filed with the Tribunal and sent to the Respondent’s solicitors by 6 July 2016. The Respondent may make such representations or objections as he deems appropriate within 14 days of receipt of the schedule.

BY ORDER OF THE TRIBUNAL

Dated this 21st day of June 2016